SaskPower to roll out world’s first carbon capture-embedded power plant

Carbon capture storage may be unproven and expensive, but the technology appears set for its global premiere when SaskPower unveils the world’s first power plant-CCS installation at Estevan, Sask. within the next few months.

The $1.35-billion Boundary Dam Carbon Capture Project, backed by $240-million of federal funding, will see a rebuilt coal-fired plant at Boundary Dam Unit 3 embedded with a unit that sequesters carbon dioxide emissions that can either be stored in a deep well or sold.

“The capture facility is completed and it’s ready to go,” Robert Watson, president and chief executive officer of Crown-incorporated SaskPower told the Financial Post during a visit to Toronto.

This is new ground not just for SaskPower but also the wider global power industry with CCS seen as a promising way to cut CO2 emissions. Companies from across the world will be tuning in to see whether SaskPower’s gamble will pay off where others have failed.

As CCS technology becomes more widely applied, it is expected that costs will come down

Despite the setbacks, the Canadian government and industry are pushing ahead with two other CCS projects in Alberta: the $1.35-billion Quest project backed by Shell Canada Ltd., Chevron Corp and Marathon with heavy funding from Alberta and Ottawa; and a $1.2-billion Alberta Carbon Trunk Line, managed by Enhance Energy Inc. and North West Redwater Partnership also enjoys strong government backing.

“Practically all forms of low-carbon technology currently receive a good measure of government support, and some more than others,” said Victor Der, general manager, The Americas of the Global CCS Institute. “As CCS technology becomes more widely applied, it is expected that costs will come down. That’s why initial commercial demonstration projects such as SaskPower’s Boundary Dam are so important, in addition to building the confidence and experience for the financial investment community.”

Saskpower had earlier abandoned a plan to build a 300MW clean coal project in Estevan, a city of 11,000 just north of the North Dakota border, as costs more than doubled to $3.8-billion. The project was resized to 110MW and proceeded only after Ottawa offered partial funding.

The company’s persistence with CCS was borne out of necessity and new regulations. More than 50% of the province’s electricity is sourced from coal and the province’s mature coal-fired plants are set to remain an integral part of the province’s electricity grid for decades.

Saskatchewan will also be the first province hit by new federal regulations that state that all coal-burning power plants over 50 years old must either be shut down or converted to emit 420 tonnes or less CO2 per gigwatt hour by July 2015. The company’s Boundary Dam 2 would have fallen foul of the law, but the company intends to close it. Eight more Canadian plants will be affected by the rule by 2019 and another 16 by 2029, data from the Pembina Institute shows.

Boundary Dam Unit 3 currently emits 1,100 tonnes of CO2 per gigawatt-hour, but after a carbon capture upgrade, the plant’s environmental footprint will fall to 140-150 tonnes.

Globally, there are 12 large-scale CCS projects in operation and nine under construction, but Boundary Dam is the world’s first large-scale operational power facility equipped with carbon-capture technology.

Boundary Dam is especially interesting as it is a retrofit of an existing coal plant, said Chris Severson-Baker, managing director at the Pembina Institute.

“None of the technology is new, but putting it together and doing it on a commercial scale is something that needs to be demonstrated in a number of different places around the world,” Mr. Severson-Baker said.

Mr. Watson is confident Saskpower will prove the technology can capture 90% of emissions coupled with a workable business case.

“Over the next two years, we are going to run the plant, test the technology to ensure it works to the efficiency we want and we are going to verify the financial model.”

A key part of the economic case revolves around stripping off the ‘byproducts’ of the process – such as CO2, fly ash and sulfuric acid — and selling it to manufacturing and resource companies.

SaskPower will sell one million tonne of CO2 a year to Cenovus Inc. under an initial 10-year agreement at an undisclosed price. The Calgary-based oil sands producer will ship the liquid CO2 via a pipeline to a CCS facility in nearby Weyburn where it will be used to pump oil out of mature wells.

SaskPower has a few advantages as the Boundary Dam project sits on a coal mine with a 300-year-reserve, but it may also be sitting on a technological goldmine. The company owns the design and construction of the CCS project that can be franchised to companies across the world.

Mr. Watson says the company has “an ambition to commercialize the technology,” but will seek partners to market the product.

“We are going to get it running first. We are holding people back. It is going to be premature to do anything. We have lots of interest with big companies around the world,” Mr. Watson said, noting that interest has spanned across China, Japan, UAE, Germany and others.

But doubt continues to hover over the technology. As recently as last week, a U.S. Energy Department official told a government panel that capturing carbon from coal-burning power plants may raise the cost of electricity by as much as 80%.

“We don’t see the 80%,” Mr. Watson said. “If you are able to sell the CO2, then the costs are marginal. If you are not able to sell the CO2, then, yes. We will prove it out over the next two years.”